Taxpayers Flee Illinois, State Loses $26 Billion of Taxable Income

“One taxpayer moved out of Illinois every 10 minutes between 1995 and 2009,” according to the Illinois Policy Institute, and it appears taxes and tax policies are to blame for many of the losses.

Researchers at the institute examined IRS and other data and found over the past 15 years, more people have moved out of Illinois than moved in. Approximately 806,000 people on a net basis left Illinois for all other states, taking with them a net of more than $26 billion in taxable income.

In 2009 alone, Illinois lost a net of 40,000 people to 43 other states. The U.S. Census Bureau places the 2010 Illinois population at 12.8 million.

‘Public Policies Matter’

“This study shows that public policies matter. Illinois has a record of poor governance, fiscal mismanagement, and higher taxes, leaving people with no choice but to vote with their feet” by leaving the state, said Ted Dabrowski, the Institute’s vice president of policy.

“While conventional wisdom might suggest people move away in pursuit of warmer weather,” states the report, “more than 270,000 people have fled Illinois for other states in the Midwest.” Notably, Illinois has lost population to all its border states.

Researchers found “people preferred states where tax burdens were lighter and housing costs were lower” when climate was not a major factor. People also left Illinois for states with lower estate taxes, labor union membership rates, and population densities.

‘Leaving for Higher Standard of Living’

“Public policies drastically influence quality of life. On average, Illinois residents are leaving for states where they can have a higher standard of living,” said J. Scott Moody, a senior fellow for budget and tax policy with the Institute and primary contributor to the report. “State-to-state migration is the ultimate expression of voting with your feet. After tallying the vote, Illinois is losing.”

Moline, Illinois Mayor Don Welvaert said he’s not surprised by the findings because “Illinois hasn’t been able to get its act together in a number of years.”

Moline is one of the “Quad Cities” on the Illinois-Iowa border and has experienced net out-migration in recent years.

Welvaert said Illinois has a bad reputation among many people because of its notorious political and fiscal climates. Four of Illinois’ last nine governors have been convicted of federal crimes. One is in federal prison, and another—Rod Blagojevich—is scheduled to go to prison in March after being sentenced to a 14-year term last December. He was convicted on 18 corruption charges.

‘Illinois Can Regain Its Mantle’

“It doesn't have to be this way,” said Kristina Rasmussen, Illinois Policy Institute executive vice president. “Illinois can regain its mantle of being a place where people want to live if we implement public policy solutions that create a dynamic and growing environment, creating a state where families want to grow and businesses want to expand."

Moody said Illinois needs to lower taxes so it can compete with its neighbors and states around the country.

The state’s lawmakers have instead gone in the opposite direction. In 2011, legislators raised the state corporate tax 46 percent and personal income tax 67 percent. A family of four in Illinois is having another $1,500 a year, on average, taken from them as a result of the higher income tax, the report notes.

‘Must End Spending, Borrowing’

“In addition,” said Moody, “the state must end its culture of spending and borrowing, which ultimately drives up taxes and chases away residents. Only through fiscal discipline can the state avoid a crisis and set the tone for a wave of in-migration.”

“An influx of residents to Illinois could bring increased taxable income to a state in fiscal crisis, increased entrepreneurial activity to a state experiencing an employment crisis, and increased purchasing power to a state in economic crisis,” the report states.

John W. Skorburg(jskorburg@heartland.org[2])is associate editor of Budget & Tax News and a lecturer in economics at the University of Illinois at Chicago.

Author bio:

John Skorburg passed away on Saturday, March 22, 2014. We're keeping his bio online as a small expression of our appreciation for John's long and valued contributions to Heartland over the years.

John Skorburg is an associate managing editor of Budget & Tax News and a lecturer in economics at the University of Illinois at Chicago.

Before joining Heartland, Skorburg was the chief economist for the Chicagoland Chamber of Commerce. Prior to joining the Chamber, he was Director of Public Policy Planning and Analysis for the corporate office of Sears, Roebuck and Company, as well as manager of economic forecasting for 13 years.

Skorburg was born in Champaign, Illinois and attended the University of Illinois where he received a B.S. and M.A. degree in economics.